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Source Energy Services Looks Ahead

Source Energy Services said it has confidence that its 2019 sales volumes should improve from those seen in 2018 due to the addition of Montney and Duvernay customer contracts that help provide a broader customer base and more balanced sales portfolio, refreshed capital budgets from E&P companies and continued positive economics for Montney and Duvernay production.

While commodity prices remain favorable, exploration-and-production companies have been impacted by very wide differentials and an unpredictable operating environment, the company said. These factors led to a significant slowdown in completion activity in the fourth quarter of 2018.

Sand volumes in the third quarter of 2018 increased by 220,469 metric tons (Mt), or 4 percent, compared to the volume of sand sold in the third quarter of 2017. Source's sand revenue increased in the third quarter of 2018 by $37.6 million, or 60 percent, compared to the third quarter of 2017. This increase in revenue was attributable to the increase in sand sales volumes as well as a 12 percent increase ($14.63 per Mt) in average realized sand price.

In the third quarter of 2018, Source's sand revenue decreased by $10.5 million, or 10 percent, when compared to the second quarter of 2018, primarily due to a 10 percent decrease in sand volumes (83,080 Mt), partially offset by an increase ($1.07 per Mt) in the average sales price. The increase in the average price and decrease in sales volumes were primarily due to the decrease in the quantity of mine gate sales in the third quarter of 2018. Sales volumes were also negatively impacted by lower than anticipated activity levels in the WCSB in the third quarter of 2018.

During the third quarter of 2018, revenue from wellsite solutions increased by $4.5 million, compared with the third quarter of 2017 primarily due to increased trucking activity associated with the increased sand sales volumes. Wellsite solutions revenue also increased by $1.2 million in the third quarter of 2018, compared with the second quarter of 2018, primarily due to the deployment of the fourth Sahara unit in April 2018 and the fifth Sahara unit in August 2018 while trucking revenue was virtually unchanged despite the decrease in sand sales volumes.